Airlines To Offer Personalized Fares?

The International Air Transport Association (IATA) has proposed a new "standard" of personalized airfares that it says will be a "revolution in airline retailing." Photo: REUTERS/TIM WIMBORNE

Are you a loyal flier who’s tired of paying the same price as every Tom, Dick and Harry? Soon, you may not have to.

The International Air Transport Association (IATA) announced at the end of its World Passenger Symposium in Abu Dhabi that it will begin testing a new “standard” for retail distribution in 2013. Under the plan, airlines would ask consumers for personal information -- including travel history, credit card number and frequent-flier programs -- in order to offer personalized pricing for everything from seat assignments and luggage to the flight itself.

IATA, which represents airlines around the world, approved the plan for a trail period next year and, if all goes well, the system could be adopted in its entirety by 2016.

“The Internet economy has fundamentally reshaped the ways in which sellers and consumers interact. Customers expect to be recognized when they shop online. And they are used to receiving tailored offerings based on their past purchasing behavior,” said IATA’s Director General and CEO Tony Tyler. “Airlines are able to participate in this new model with those customers purchasing directly from their websites. They can recognize return visitors and make offers based on travel history, loyalty status, credit card brand or other metric. And customers have complete visibility of additional products and services on offer.”

The move is widely seen as an attempt by airlines to curb the growing influence of online travel comparison sites like Kayak, Orbitz and Travelocity.

Airlines' profits have shrunk over the years while other parts of the travel business -- from the caterers and maintenance firms to the airports themselves -- have done quite nicely. In terms of the "global distribution systems" (GDSs), these computerized reservation services enjoy some of the best margins in the business. Originally created by several of the largest airlines to distribute their flights through travel agencies, they have now become independent firms -- independent firms that have come back to haunt the very people who created them.

"Over 50 percent of airfare and hotels are booked on third-party sites," George Hobica, founder and CEO of AirfareWatchdog.com, told IBTimes last month. "Airlines are trying and have been trying for many years to move the needle in their direction, but the reason people book directly with Expedia and so forth is the vast majority of consumers only care about price."

And if you care about price, you go to the comparison sites, who then charge the airlines a fee of around $20 to $25 round-trip.

Take Travel Forward, an airline lobby group, claims the world's air carriers pay some $7 billion in GDS fees annually, a figure that many analysts say is double their expected net profits this year.

Airlines say they are unable to offer loyal customers lower prices because of the anonymity of these GDS systems, but opponents of the plan say most passengers don’t even have frequent-flier memberships and would be unfairly penalized. They worry that some people could be charged more for living in wealthier zip codes or for using a Mac instead of a PC. Moreover, they argue that there are obvious data-privacy issues that would have to be addressed as consumers worry about Big Brother looking over their shoulder.

IATA claims that the personalized prices would also be available through travel agents, but this means that the private information would be widely shared.

The American Society of Travel Agents (ASTA) and the Business Travel Coalition (BTC) have emphatically rejected the claim by IATA that the plan was the “culmination of 12 months of intense coordination across the value chain with participation from airlines, global distribution systems, the travel agency community including online travel agencies and IT providers and their respective trade organizations.”

“The claim of participation by 'the travel agency community' and its 'trade organizations' is an illusion, plain and simple,” said Nina Meyer, president and chief executive officer of ASTA. “We and fellow travel agency organizations around the world have been denied transparent participation in the development process for what IATA calls the New Distribution Capability (NDC). And the claim that it will enhance competition is called into question in light of NDC’s apparent preclusion of full price transparency and comparison.”

Nevertheless, IATA is pushing forward.

“We expect to complete the Standards definition next year,” Tyler said. “Then competition and travelers’ needs will guide airlines, agents, system providers and new entrants with tremendous opportunities for innovation.

“Forty years after the birth of the current distribution paradigm, we have an opportunity for a revolution in airline retailing.”